Legislators punt on pension reform but pass gambling expansion

— State lawmakers spent the final day of the spring session failing to act on the crucial issue of pension reform, instead approving a major gambling expansion that wasn't at the top of the agenda.

The turn of events dealt a significant blow to Gov. Pat Quinn, who had pleaded with the General Assembly to focus on issues that were necessary and to skip distracting sideshows.

The Democratic governor had pushed hard to rein in government worker retirement costs that threaten the state's finances, but his efforts to come up with Democratic support for pension reform fell flat when he asked that the bill not be called for a vote.

For the second year in a row, Quinn opposed a gambling bill that would add a casino in Chicago and four other cities and allow slot machines at horse racing tracks. This time the governor cited a lack of safeguards. But legislators set aside the prospect of a Quinn veto as they passed a gambling expansion late Thursday.

While lawmakers prepared to go home and start campaigning, Quinn indicated he's going to meet with legislative leaders, try to hammer out an agreement and call the House and Senate back this summer. At stake is fixing the nation's worst-funded retirement system, which carries an $83billion debt. If unresolved, pension reform is likely to become an important issue this fall when all 177 House and Senate seats are up for election.

"As I have repeatedly made clear, inaction on pension reform is not a choice," Quinn said. "We must fundamentally reform our pension system, and we must enact bold reform that eliminates the unfunded liability."

Both Democrats and Republicans acknowledge that the current pension system is unsustainable, the result of decades of insufficient state tax dollars being pumped into the retirement funds. Pension payments are taking an ever-greater share of the pie that could be devoted to education, social services or unpaid bills.

Failing to fix the retirement systems could result in another hit on the state's credit rating, which already has been downgraded to worst in the nation by one agency. That would make it more expensive for the state to borrow money.

The pension drama started Wednesday night, when Democratic House Speaker Michael Madigan said he would remove himself as the sponsor of pension reform and hand it off to his Republican counterpart, Rep. Tom Cross. The two leaders disagreed on a provision Madigan wanted to shift pension costs for suburban and Downstate teacher retirement from the state to local school districts. Cross said that would result in property tax hikes.

Left unstated was whether Madigan would support Cross' version of pension reform. On Thursday morning, the powerful speaker, known for playing political chess when others play checkers, delivered his answer: He would not.

That peeled off Democratic support. House Republicans were prepared to put up at least half of the 60 votes needed to pass the pension changes, but Quinn could not muster enough House Democrats, and Cross pulled the plug late Thursday.

"We need to find a bipartisan way on both sides — a solution to this pension issue," said Cross, of Oswego. "Pension issues and debates create controversy and a lot of emotion," Cross added. "It doesn't do us any good to continue to fight."

Madigan's decision to give Cross control of the bill had been seen by some as a way for Democrats who run the General Assembly to avoid making changes to public worker pensions. Unions are a key Democratic constituency, and Illinois' public workforce is heavily unionized. At the same time, Madigan and Democrats could blame Cross and Republicans for stalling comprehensive pension reform.

"There's a lack of will right now on a legislator's part because of elections," said Sen. Mike Jacobs, D-East Moline. "I think a lot of people are worried about what is going to happen. And really you're asking Democrats to vote against their (union) base. It's a hard vote."

But the cost-shift issue also transcended party lines, and it was questionable whether Madigan's original plan could have passed on the votes of his Democratic majority alone. Some suburban and Downstate Democrats, fearful of backlash over the cost-shift provision that could increase local property taxes, also had said they could not support the bill.

While the House pension talks collapsed, the Senate sought to politically insulate itself by passing a plan affecting the pensions of themselves and state workers — even though the legislation was not taken up in the House.

The measure, which would not affect teacher pensions, requires state workers and lawmakers and retirees to accept smaller cost-of-living increases than the current 3 percent level if they want to keep their access to state health insurance. Senate President John Cullerton, D-Chicago, said the measure was a "good start. ... It starts with ourselves."

The gambling expansion would authorize Mayor Rahm Emanuel's city-owned casino in Chicago along with new casinos in the south suburbs, north suburban Park City, Rockford and Danville, as well as slots at horse tracks. Sponsoring Sen. Terry Link said the measure could raise as much as $400 million in license application fees in the budget year that begins July 1 and could generate between $300 million and $1billion when all of the gambling is operational.

Link, D-Waukegan, denied he was trying to embarrass Quinn and said he hoped to get enough votes to override a veto and force the governor to work with lawmakers.

"I think there's a lot of legislators who realize that while we're slashing and cutting … and doing things that are hurting people left and right, we can do something that will create jobs and bring in new revenue without a tax increase on any person in the state of Illinois," Link said. "There's a will to get this done and get this over with."

A similar casino measure passed last year, but Quinn criticized it as being too expansive. This year, Quinn attacked the bill for failing to ban political contributions from gambling interests. John Schomberg, Quinn's general counsel, told the Senate Executive Committee that revenue estimates were overstated and that the bill lacked adequate state authority over the Chicago casino.

"The governor's largest concern continues to be largely unaddressed — the ethical shortfalls," Schomberg said.

The measure passed the Senate 30-26, the bare minimum needed for approval and six votes shy of the veto-proof three-fifths majority Link had sought. When it passed the House last week, it got 69 votes — two shy of the number needed for an override.

In an appeal to Quinn to sign the measure, Link said he filed a new bill with more oversight of the Chicago casino and a ban on political contributions from gambling licensees. The separate bill also would take $75 million in state gambling revenues and use them to help fund financial need-based college grants.

Lawmakers met late into the night Thursday ahead of a midnight adjournment deadline as the Senate approved a $33.7 billion state budget that House Democrats say would increase spending by about $300 million. The plan would cut funding to education, public universities and health care for the poor.